Exhibit 99.1
Lehman Brothers
2005 High Yield Bond and
Syndicated Loan Conference
March 17, 2005
Michael J. Keough
President and Chief Executive Officer
Ronald J. Domanico
Senior VP and Chief Financial Officer
Forward-Looking Statements
This press release may contain certain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that represent the company’s expectations, anticipations or beliefs about future events, operating results or financial condition. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially depending on a variety of important factors, including, but not limited to, fluctuations in raw material prices and energy costs, increases in pension and insurance costs, downturns in industrial production, housing and construction and the consumption of durable and nondurable goods, the degree and nature of competition, demand for the company’s products, the degree of success achieved by the company’s new product initiatives, changes in government regulations, the company’s ability to complete acquisitions and successfully integrate the operations of acquired businesses, the company’s ability to service its substantial indebtedness, unforeseen difficulties with the consolidation, integration or relocation of the company’s accounting and control operations, IT systems or legal function. Additional relevant risk factors that could cause actual results to differ materially are discussed in the company’s registration statements and its most recent reports on Form 10-K, 10-Q and 8-K, as amended, filed with or furnished for, the Securities and Exchange Commission, which are available from the company. These documents also may be examined at public reference facilities maintained by the Securities and Exchange Commission or, to the extent filed via EDGAR, accessed through the web site of the Securities and Exchange Commission (www.sec.gov). The company does not undertake any obligation to update any forward-looking statements and is not responsible for any changes made to this press release by wire or Internet services.
Section I
Business and Industry Update
Who is Caraustar?
A billion dollar publicly traded company (NASDAQ:CSAR)
The world’s largest integrated manufacturer of recycled boxboard
A strong cash generator that has returned to profitability
Implemented management succession plan
A stable of differentiated products in a “commodity” business
1
Who is Caraustar?
CARAUSTAR
Star Paper Tube
Carolina
Paperboard
Austell Boxboard
(1955)
(1938)
(1948)
IPO: October 8, 1992 (NASDAQ: CSAR)
2
Business and Industry Update
Leadership positions in each of the four principal
recycled paperboard product markets
(Caraustar 2004 tonnage and demand drivers)
#3
#1
#2
Other Specialty
273,700 tons
22%
Mill Group
Folding Cartons
406,300 tons
32%
CPG
Gypsum Facing
Paper
245,000 tons
19%
Mill Group
Tubes, Cores and
Composite Cans
338,800 tons
27%
ICPG
#3
Consumer
Durable Goods
12%
Construction
17%
Consumer
Nondurable Consumption
86%
Commercial
Construction
20%
Industrial
Production
75%
Repair and
Remodeling
40%
Industrial
Production
14%
Consumer
Nondurable Consumption 8%
Consumer
Nondurable Consumption
88%
Single and Multifamily
Construction
40%
3
Business and Industry Update Industry Overview
Volume: Two Drivers: Manufacturing migrating
offshore, health of the general economy
After 3 years of decline, 2003 was up 0.9%,
2004 +2.6%
Price: Main Driver: Capacity utilization
demand driven, not cost driven
Fiber: 2002: $40 $130 $50
2003: $50 $ 75 $65
2004: $65 $ 85
Energy: A challenge
China: “A Paper Tiger”: learning capitalism — slowly
Capacity: Significantly better … economic improvement …
Mill Closures
4
Business and Industry Update
Mill Operating Rates Are Improving
Caraustar typically maintains higher utilization rates than industry averages
99.5%
99.0%
99.0%
100%
98.4%
98%
96.4%
95.6%
95.8%
95.5%
96%
95.3%
95.0%
94.5%
(1)
93.0%
92.9%
94%
92.0%
91.8%
92%
90.1%
90%
89.7%
88.1%
88.1%
88%
85.0%
86%
83.5%
84%
82.2%
82%
80%
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
2004
Caraustar
Industry
(1) Excludes closed or idled machines
Industry Source: American Forest and Paper Association.
5
Mill Operating Rate Improvement Driven By Mill Closures Recycled Boxboard Closures – 2001-2004
Coated Recycled (m Tons)
Uncoated Recycled (m Tons)
Crown – BC, Canada
30
Papertech – NH
30
BPB – IL
50
Ft. Orange – NY
75
Recyc Paperboard - NJ
65
CSAR – IL
50
Republic – CO
70
CSAR – NY
50
Newark – CA (1 of 2)*
50
Rock-Tenn – TX (1 of 2)*
45
CSAR – NC
55
Newark – MA
70
Rock-Tenn – VA (1 of 2)*
28
CSAR – GA
70
Rock-Tenn – MI
52
Garwood - NJ
106
SSCC – CA (1 of 2)*
50
Kieffer – IN
45
Simkins – MD
35
Lydall – CT
30
Minas Basin – NS,
60
RPM – MI
60
Simkins – CT
30
30
Sorenson – MI
Canada
SSCC – PA (1 of 2)*
40
Sonoco – KS
55
Newark – NJ
70
Sonoco – OH
50
Newark – OH
45
CSAR – OH (1 of 2)*
47
Sonoco – GA
40
Newark – ME
75
Newark – CA (1 of 2)*
55
430
Coated Subtotal
1,283
Uncoated Subtotal
1,081
Total Tons Top Co’s.
1,713
Total Tons
Category Summary
Companies:
325
Newark
1,283
Uncoated Tons
18
Facilities:
283
Caraustar
430
Coated Tons
32
Machines:
226
Rock-Tenn
1081
Tons by Top 5
33
Sonoco
63%
% by Top 5
132
SSCC
834
Tons by Top 3
115
% by Top 3
49%
*paperboard machines
Sources: RISI, AF&PA & Company info
6
Caraustar is the Largest U.S. Recycled Boxboard Producer
Estimated 2004 capacities(1)
Other
Folding
Gypsum
Tube &
Market
Capacity
Specialty
Cartonbd
Facings
Core Stock
Company
Rank
Share
20%*
1,420
310
330
410
370
Caraustar
1
850
170
500
80
100
Rock-Tenn
2
12%
780
370
130
0
280
Newark Group
3
11%
780
80
0
0
700
Sonoco
4
11%
570
60
510
0
0
Smurfit-Stone
5
8%
500
0
0
500
0
U.S. Gypsum
6
7%
360
30
330
0
0
Graphic Packaging
7
5%
280
0
0
280
0
National Gypsum
8
4%
240
0
0
240
0
Georgia Pacific
9
3%
170
20
150
0
0
Simkins Industries
10
2%
980
330
350
200
150
Others
14%
100%
6,930
1,370
2,300
1,710
Total U.S. Capacity
1,600
(1) Source: American Forest and Paper Association and company estimates
*Includes Otsego, MI mill closure
7
Business and Industry Update
Boxboard Shipments (tons in thousands)
2003 vs. 2002
2004 vs 2003
Caraustar*
Industry
Caraustar
Caraustar
Industry
% Change
% Change
2004
% Change
% Change
2003
2002
(000) tons
(000) tons
-1.1%
-2.8%
406.3
-2.5%
-6.2%
418.2
445.6
Recycled
Folding
4.6%
338.9
-0.2%
15.9%
324.1
279.6
Tube Can &
4.9%
Drum
30.8%
244.9
3.6%
5.1%
187.3
178.1
Gypsum
8.2%
Facings**
19.8%
273.7
5.6%
6.5%
228.4
214.6
Other
0.2%
Specialty
9.1%
1263.8
0.9%
4.2%
1158.0
1117.9
Total
2.6%
* Includes outside purchases
**Includes gypsum facing volume from our 50% owned PBL joint venture
8
Differentiated Products
Light Weight Gypsum Facing Paper (PBL)
Fourdrinier technology gives comparable strength at lower basis weight
Lower basis weight:
Lower cost (fiber)
Less energy
Less freight
Fewer changeovers
Higher utilization
Builder preference
Capacity:
300,000 tons/yr
15 BSF/yr
18% of U.S. market
5 panels/sheet
9
Differentiated Products
Tubes, Cores and Composite Containers
Three competitors control 88% of the market
Sonoco 50%
Caraustar 28%
Newark 10%
Others 12%
Totally vertically integrated
Balanced customer base
Other
Paper
Carpet
Yarn
Cloth
Film
10
Differentiated Products
Partitions
Segment dominated by RTS
The only other integrated partition company in the U.S.
An integrated business provides opportunity to grow market share with major national accounts
Multiple plants positioned to service the industry
Partitions are die cut and have unique locking assembly features
11
Differentiated Products
Other Specialty Products
The “other specialty” recycled paperboard market comprises numerous specialty end-use product niches, many of which require value-added converting processes
Caraustar produces recycled paperboard for use in virtually every end-use segment of the “other specialty” recycled paperboard market
Caraustar shipped 266 thousand tons (83 internally) in 2004 and had a market share of approximately 20 percent
12
Differentiated Products
“InverFreez “ (Sprague)
Fourdrinier technology
Freeze / thaw tolerant
Smooth sheet
“Square” sheet
Print quality at parity with virgin (CUK)
Cost advantage of 15-30% vs. virgin (CUK)
13
Differentiated Products
“Statone ”
The trademark Statone line of grease resistant paperboard is recognized throughout the industry
Multiple Statone grades are targeted to specific end use needs
Statone paperboard is utilized for packaging of marquee name products
Rittman Mill recognized as an industry leader in the production of grease resistant packaging for nearly 30 years
Large, stable market
14
Differentiated Products
Folding Cartons and Custom Packaging
Top ten position in the U.S. folding carton market
Strategic focus has shifted to offering a complete portfolio of primary and secondary packaging along with certified folding cartons to the pharmaceutical and healthcare industries
Caraustar sold 406 thousand tons (92,000 internally) of recycled paperboard to the folding carton market in 2004
15
Out of one hundred awards given at the 2004 National Paperboard Packaging Competition, Caraustar’s Custom Packaging Group was recognized 15 times with 5 Gold and 10 Excellence Awards … 15% of all awards!
16
Section II Recent Results and Profit Improvement Initiatives
2004 Full Year Results
($ in millions)
Dec. 31, 2004
Dec. 31, 2003
1,158.0
Tons sold* (in thousands)
1,264.0
$992.2
Sales
$1,060.3
$156.9
Gross Profit
$159.9
$148.0
SG&A Expense
$136.4
($6.2)
(Loss) income from operations
$11.7
$20.0
Capital Expenditures
$20.9
$45.4
EBITDA**
$64.6
* Includes volume from our 50% owned PBL joint venture.
** See supplemental information regarding non-GAAP measures included in
the Company’s Form 8-K furnished on February 15, 2005.
17
Caraustar Has Turned The Corner
In the second quarter 2004, the company generated its first profit in fifteen quarters
Year-to-date mill volume vs. last year was up 7.9% with three fewer mills this year. The operating rate was over 96%
Increased demand and higher industry operating rates (92%) have enabled price increases for the first time in three years
2004 SG&A expense vs. last year was down $11.6 million, 7.8%
18
Caraustar is well on the way to returning to historic levels of profitability through four key initiatives
1. Right-sizing
2. Procurement Leverage
3. SG&A Reduction/centralized process
4. Working Capital Optimization
19
FOUR INITIATIVES: Right-sizing
Matching supply to demand
Running more product on fewer, more efficient
machines
One-Time Costs
Annual
Cash
Savings
Total
Non-Cash
Cash
Year
$8.0
$9.3
2002
—
$17.3
$16.7
$10.5
$6.2
2003
$15.7
$21.5
$15.2
$6.3
2004
$24.0
$55.5
$33.7
$21.8
Total
$25.5
20
FOUR INITIATIVES: Procurement Leverage
Use our scale as a billion dollar company
Centralized Process
Estimated
2005
2004
Annual
External
Savings
Savings
Savings
Spend
($ millions)
$2
???
$339
Fiber, Freight & Fuel
$2
$9
$4
$9
$71
Chemicals, Corrugated & Clothing
(1)
$5
$0
$9
$85
Coatings, Ink, Temp Labor, IT
(2)
$0
$0
$25
Non-sourceable (taxes, benefits)
$0
$0
$12
$247
Future sourceable
$0
$6
$30
$767
$16
MRO, starch, lift trucks, electrical, travel, screens & plates, cell phones, FedEx, oil, propane,
(1)
office supplies
Pallets, adhesives, plates & dies, labels & graphics, communications, waste disposal
(2)
21
FOUR INITIATIVES: SG&A Reduction
Centralized Support Services
Aggressively address insurances, professional
services, etc.
As Reported ($ millions)
Excluding
Nonrecur.
Items*
%
SG&A
Sales
Year
14.6%
$136.9
$936.8
2002
14.6%
14.9%
$148.0
$992.2
2003
13.8%
12.9%
$136.4
$1,060.3
2004
12.4%
Caraustar Peer Group
10.2%
Gap to average
$28.3
2.7%
See supplemental information regarding non-GAAP measures included in
the Company’s Form 8-K furnished on March 16, 2005.
22
FOUR INITIATIVES: Working Capital Optimization
Proactively manage the supply chain
Collect and pay at industry norms
Days
Amount ($ millions)
2004
2003
2002
2004
2003
2002
39.0
45.5
$89.0
$87.6
$107.6
Inventories
36.1
34.5
37.1
102.6
93.9
106.1
Receivables
35.3
33.4
25.0
($84.9)
(75.0)
(60.0)
Payables
34.4
$106.5
$153.7
Total
$106.8
23
EBITDA IS GROWING 2004 EBITDA* (Includes JV contributions to the extent received by Caraustar as cash dividends)
$ millions
20.3
25
17.8
17.5
20
9.0
15
10
5
0
Q3 2004
Q2 2004
Q1 2004
Q4 2004
2005 opportunities include:
Price increases $22
Right sizing 6
SG&A target 15
Procurement target 10
Incremental $53
Trend positive in spite of a seasonally slower Q4
Received initial cash distribution from PBL of $1 million in Q4 – potentially more to come
See supplemental information regarding non-GAAP measures included in
the Company’s Form 8-K furnished on February 15, 2005.
24
Liquidity is Very Strong
$MM
$90
Cash on Hand (as of 12/31/04) ·
75
Revolving Credit Facility·
(39)
L.C.’s which reduce availability·
Current
$126
OPPORTUNITIES:
29
Potential Refinancing Standard Gypsum·
5
Property Held for Sale·
10
Working Capital Target·
Near Term
$170
25
Recent Developments
Charlie Greiner and Eric Zarnikow added to the Board of Directors
Additional $10M in Sr. Sub notes repurchased
Chicago property sold for $11.1M ($10.3M gain)
Price increase of 7.5% (min.) announced – Composite Container Division
China joint venture formed – Recovered Fiber
Rittman (Ohio) #2 CRB machine permanently shut
Routine SEC reviews completed without restatement
Universal Shelf (S-3) filed with the SEC
Independent auditor clarification
Caraustar – no change – Deloitte
Standard Gypsum (unconsolidated affiliate) – change to Deloitte
26
Caraustar’s Progress is Reflected by the Financial Markets
Stock (NASDAQ:CSAR) - Price up 22% in 2004
Our Bonds are Trading Above Par
Price*
Callable
Coupon
Outstanding
Issued
Preference
**NC
7.375%
$190M
$200M
Senior
106.0
**NC
7.250%
$29M
$29M
Senior
N/A
4/06
9.875%
$265M
$285M
Sr. Sub
109.5
* As of 3-8-05
**Make-whole to Treasuries at any time
27
Strategy / Outlook
Caraustar is positioning itself to be successful regardless of external factors
Near Term Agenda
Continue expansion of differentiated products
Execute rationalization of under-performing businesses
Leverage procurement
Reduce SG&A / back office costs – in conjunction with Sarbanes-Oxley control initiatives, streamline processes
Extract additional cash from working capital
Real Estate Sales – 7 properties
Net Debt Reduction
28
APPENDIX
Pricing
Increase
Product
Announced
Effective
$50/ton
URB
3/1/04
3/29/04
$50/ton
CRB
3/10/04
4/10/04
8%
T&C
3/18/04
4/12/04
6%+
URB/CRB
8/25/04
9/20/04
5%+
T & C
9/27/04
10/25/04
7.5-14%
Composites
12/6/04
1/3/05
A1
FOUR INITIATIVES: Right-sizing
One-Time Cost
Annual
$MM (Pre-tax)
Total
Non-Cash
Cash
Cash Benefit
(3.4)
(3.0)
(0.4)
2002
Halifax Closure
0.6
0.6
0.0
2003
1.0
(4.5)
(3.2)
(1.3)
2003
Buffalo, Camden Closures
3.5
(0.5)
(0.4)
(0.1)
2004
(1.7)
(1.7)
0.0
2003
Cedartown Closure
(1.3)
(0.5)
(0.8)
2004
2.0
(2.4)
(1.3)
(1.1)
2003
Rittman #2 Closure
5.0
(8.8)
(8.8)
0.0
2004
(6.0)
(2.4)
(3.6)
2002
CCI, Mooresville, Paradigm
(2.1)
(0.9)
(1.2)
2003
3.6
(1.9)
(1.3)
(0.6)
2004
(2.4)
(1.2)
(1.2)
2002
Ashland Carton
(6.7)
(4.1)
(2.6)
2003
(4.0)
(0.4)
(3.6)
2004
3.8
(5.0)
(3.8)
(1.2)
2004
Charlotte/Georgetown
1.6
(4.2)
(0.1)
(4.1)
2002
Eight Tube & Core Facilities
(1.2)
(1.2)
0.0
2003
5.0
25.5
(55.5)
(33.7)
(21.8)
Totals
A2
Primary Initiatives - Procurement Leverage
Projects Underway (Annual Spend in $Millions)
Machine Clothing
$90
Fiber
$6
Packaging
$60
Freight
$6
MRO
$70
Fuel
$3
Electrical Supplies
$80
Paper
$3
Communications
$37
Chemicals
$2
Automobiles
$11
Corrugated
$2
Represents $370 million or 65% of annual spend for goods and services
A3
Primary Initiatives
Selling, General & Administrative Reduction
¨
April 2003 annual run rate*
$170 million
$150 million
April 2004 annual run rate*
¨
$(15) million
Reclassification of packaging cost to COGS
¨
$(15) million
Targeted incremental savings
¨
$120 million
April 2005 annual run rate target
¨
Savings
Costs
Field accounting
Chemical overhead
Sarbanes-Oxley: IT
Communication
Insurance Premiums
Sarbanes-Oxley: Audit
Travel
Property taxes
Credit Manager
Professional Services
Employee benefit costs
Sales Resources
Properties for sale
Lower bad debt
Bonuses
*See supplemental information regarding non-GAAP financial measures included in the Company’s Form 8-K furnished on May 19, 2004.
A4
Primary Initiatives
5/04 - 4/05
5/03 - 4/04
Achieved
Target
Target
$16
$15
Right-Sizing
$7
$2
-
Procurement Leverage
$10
$20
$20
SG&A Reduction
$15
$58
$30
Working Capital*
$10
*Receivables plus inventories less payables impacts cash but not earnings
A5
Biographies
Michael J. Keough
President and Chief Executive Officer
Mr. Keough was appointed President and Chief Executive Officer of Caraustar effective January 1, 2005. He joined Caraustar in March 2002 as Senior Vice President and Chief Operating Officer, and has served as a director since October 2002. Prior to becoming a member of Caraustar’s executive management team, he served as President and Chief Operating Officer of Gaylord Container Corporation from April 2000 through March 2002, and as its Vice President of Container Operations from October 1993 through April 2000. He began employment with Gaylord Container Corporation in 1985 following ten years with International Paper.
Ronald J. Domanico
Senior Vice President and Chief Financial Officer
Mr. Domanico joined Caraustar as Vice President and CFO in October 2002. Prior to joining Caraustar, he was Executive Vice President and CFO of AHL Services, Inc., in Atlanta. From 1981 to 2000, Mr. Domanico worked for Kraft Foods and Nabisco in a succession of progressively more senior financial management, planning, business development and operations roles. His last eleven years at Kraft and Nabisco were in CFO positions, and when he left the company he was Senior Vice President and CFO for Nabisco International and CEO for Nabisco Asia.
William A. Nix, III
Vice President, Treasurer and Corporate Controller
Mr. Nix rejoined Caraustar in January 2001. Prior to that, he was Vice President and Treasurer of Agco Corporation from 1995 to 2000. From 1991 to 1995, he was Director of Corporate Finance for Caraustar and, prior to 1991, was with Arthur Andersen LLP, Certified Public Accountants.
Note Regarding Non-GAAP Financial Measures
This presentation includes the following financial measures: “EBITDA” (as defined by the Company’s senior credit facility), and Selling, General and Administrative expenses excluding “Nonrecurring Items” as a percentage of sales. These items are not financial measures under generally accepted accounting principles in the United States. Because these items are not GAAP financial measures, other companies may present similarly titled items determined with differing adjustments. Accordingly, these measures as presented herein should not be used to evaluate the Company’s performance by comparison to any similarly titled measures presented by other companies. The Company uses, and believes that the “EBITDA” measure for the Company is useful in evaluating the Company’s performance and its ability to comply with its debt covenants. The reconciliations of these non-GAAP measures have been filed in our 8-Ks.
Caraustar Industries, Inc.
Reconciliation of SG&A as a Percentage of Sales
(In Thousands)
| For the Year Ended December 31, 2003 |
For the Year Ended December 31, 2004 |
|||||||
| Sales (GAAP) |
$ | 992,200 | $ | 1,060,275 | ||||
| Selling, General and Administrative Expenses (GAAP) |
$ | 147,998 | $ | 136,445 | ||||
| Selling, General and Administrative Expenses |
14.9 | % | 12.9 | % | ||||
| Non-Recurring Items (Non-GAAP) |
$ | (11,500 | ) | $ | (5,500 | ) | ||
| Adjusted Selling, General and Administrative |
$ | 136,498 | $ | 130,945 | ||||
| Adjusted Selling, General and Administrative |
13.8 | % | 12.4 | % | ||||
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